Private Equity News & Analysis

3i exits Chinese department store via IPO

PCD Stores raised $374m in its IPO, which was 43 times oversubscribed and generated a 'strong return' for the UK-headquartered private equity firm.

-

PCD Stores, a 3i-backed group of department stores in China, today began trading on the Hong Kong Stock Exchange after raising HK$2.9 billion ($374 million; €255 million) in its initial public offering.

The IPO, which valued the company at HK$7.8 billion, saw a complete exit for 3i. The firm invested $31 million for a stake of about 10 percent in October 2005, Anna Cheung, a partner and co-head of China at the firm, said in an interview.The divestment has generated a “strong return” for the UK-headquartered private equity firm.

As reported earlier, PCD earlier this month registered to raise up to HK$3 billion through an IPO. The final offer comprised 1.5 billion shares, of which 500 million were from selling shareholders. It was priced at HK$2 per share, the upper end of the indicative price offer price range, which started at HK$1.65. The issue’s retail tranche was 43 times oversubscribed, according to a 3i statement.

Set up in 1998, PCD Stores is focused on luxury and high-end fashion and accessories. During the period of 3i’s investment, the company saw revenue and profit compound annual growth rates of about 100 percent in 2008 and 2007, according to a 3i statement. Its network of self-owned stores also grew to nine from four since January 2006.

The capital raised from PCD Stores’ IPO will be used to fund new store openings, acquisitions, and the construction of a retail, commercial and hotel development project, which is being jointly developed with another developer, the 3i statement noted.

The company booked a profit of RMB124.1 million ($18 million; €12 million) for the six months ended 30 June 2009. As of 30 September 2009, its debt stands at about RMB1.3 billion.

A number of private equity-backed Chinese companies have recently listed on the Hong Kong Stock Exchange. China Forestry and real estate developer Kaisa Group, both backed by The Carlyle Group, raised $200 million and $445 million from their IPOs in December. In October, Yingde Gases, an industrial gas supplier backed by Baring Private Equity Asia raised HK$3.16 billion from its IPO.